CalSTRS experiments with new opportunities in a tough market

Thu May 3, 2012

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Global macro strategies take centre stage within innovation portfolio to reduce risk


By Susan Barreto

Steven Tong

Chris Ailman
Earlier this year, the governing board of the California State Teachers’ Retirement System made a difficult decision faced with a $56 billion funding shortfall. Trustees adopted a new set of actuarial assumptions that included lowering the investment return assumption from 7.75% to 7.5%. That shortfall has since grown to $64.5 billion.

The change may seem minor, but in reality it is a key admission that the $152 billion retirement system is not immune from the market forces that have forced many pension boards to bring their investment expectations even lower given the long-term prospects for financial health.

While trustees hope that any funding the legislature and administration sets aside would reflect the more realistic market expectations, the reality is that CalSTRS cannot set its own contribution rates and that means there is much less known about the future fiscal condition of...

ISSN: 2151-1845 / CDC10004H

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